HONG KONG, CHINA – Media OutReach – 17 November 2019 – 66 per cent of respondents from the accounting and finance sector expect Hong Kong’s economy to contract in 2020 while 73 per cent believe that the city’s competitiveness will decline, according to the latest Hong Kong Economic Survey conducted by CPA Australia.
Growing anxiety about the economic outlook
The rather bleak prospects for the year ahead is reflected in the two-thirds of respondents forecasting Hong Kong’s economy to contract in 2020. This represents a significant decrease in economic confidence from previous years, when only 20 per cent of respondents expected Hong Kong’s economy to contract in 2019 and 4 per cent in 2018.
The most frequently selected prediction is for Hong Kong’s GDP to decline by greater than one per cent (chosen by 43 per cent of respondents). This signifies a major shift to negative sentiment from previous years where the most popular choice was for GDP to expand by 2 to 2.9 per cent in both 2018 and 2019.
It comes as no surprise thus, that 73 per cent of respondents believe that the competitiveness of Hong Kong will decline in 2020, up 25 percentage points from 2019.
In the jobs market, the share of respondents who expect that there will be a reduction in company headcount doubled from 15 per cent in 2019 to 30 per cent in 2020, although two-thirds of respondents (66 per cent) believe that their company’s headcount will either remain the same or increase in 2020.
This negative outlook is reinforced by 90 per cent of respondents expecting retail property prices to decline in 2020 compared with 42 per cent of respondents for 2019. The share of respondents who believe retail property prices will decline by more than 11 per cent in 2020 increased to 65 per cent from 24 per cent in 2019.
Mr Roy Lo, Divisional President of Greater China of CPA Australia 2019 says: “There is no doubt that external and local uncertainties are making our respondents anxious over the economic outlook. The slowing global economy, the US-led trade war, and lower economic growth in mainland China are negatively impacting Hong Kong’s economy, with the continuing social unrests making a tough situation worse.”
Actions on recovering the business community
“The survey findings show that 2020 should be a challenging year for business. It is therefore not surprising that half of our accounting and finance respondents believe that ‘cost management’ will be their company’s key strategic focus for 2020. This suggests that many companies are reacting to expected difficult conditions with a more prudent approach.
“Accounting professionals have a wide range of skills to assist businesses to manage through this period and prepare for future growth. This includes reviewing cost structures, improving cash flow management and seeking improvements to business operations”, Lo says.
“Additionally, ‘investing in innovation and technology’, which may enhance productivity and transform business models is the second most popular choice (30 per cent). This type of investment indicates that companies are eyeing long-term growth and are seeking to stay ahead of continual technology disruption.
“Technological advances will not stop disrupting traditional industries and transforming business models regardless of the slowing global economy. We are therefore encouraged that despite the economic outlook, nearly a third of respondents expect that investing in innovation and technology will be one of their company’s key strategic focuses in 2020.”
“Businesses should at least keep up with technological trends to cater to changing customer needs, new regulations and new industry practices. For example, the launch of virtual banks may change how people consume traditional banking services while the role out of 5G may unleash the potential of e-sports to target the young generation,” Lo says.
When asked what are the most effective contributors to the Hong Kong’s economy, respondents were again most likely to identify Hong Kong’s low and simple tax system and the Greater Bay Area (GBA) initiative as the top positive factors. Our respondents believe the continuation of these policies is important to Hong Kong’s future success.
“Many respondents believe the GBA initiative will be a major contributor to Hong Kong’s future growth. The policy measures announced recently will make it easier for Hong Kong residents to live and work in other parts of the bay area. We suggest that the government considers offering more funding and assistance to help local firms expand into markets outside of Hong Kong and exploit opportunities from the Greater Bay Area initiative,” Lo says.
Mr Lo further suggests: “To rebuild Hong Kong’s business confidence and competitiveness, CPA Australia urges the government to take actions to enhance Hong Kong’s position as an international financial centre by leveraging Hong Kong’s financial strengths and infrastructure advantages to continue driving the development of FinTech, asset management, green finance, and to introduce more targeted tax incentives.”
Looking ahead, Lo concludes, “We are living in a world that is increasingly volatile, uncertain, complex, and ambiguous (VUCA). Companies must therefore be increasingly agile to respond to this VUCA challenge while also keeping an eye out for growth opportunities. Upskilling the workforce and acquiring technology-related knowledge are vital to maintaining competency in the business world nowadays.”